Why my client investment strategy will stay the same in 2017

Why my investment strategy for client portfolios will be the same in 2017 as it was in 2016. 

As we reach the end of yet another fantastic year, it’s time to reflect on the further success of the mighty human race. The Olympics in Rio were spectacular; our dearest Queen turned 90; it was the 400th year death-anniversary of the planet’s greatest wordsmith ever, Mr William Shakespeare. There were countless amazing cultural and art festivals around the globe. We live in amazing times.

We continue to innovate, educate more people and lift more and more families out of extreme poverty. Modern media will continue to focus on the ‘negative’ events of 2016. Who knows if they are as negative as portrayed or if they are just changes or tweaks in time?

No self-respecting financial planner (truth giver) ever wants to talk about short-term (anything less than decades) market movements but at time of writing the major stock markets of this great planet are all approximately 10% higher than the start of 2016. We have a few trading days left but I expect this won’t change much in the remaining couple of weeks of this year.

However, had you listened to modern media’s greatest trick – trying to convince you the world is going to end and all of your client’s life savings would become worthless and that the investment markets are a vehicle to poverty rather than a vehicle to lifetime and multi-generational wealth creation – then it’s likely you would have ‘positioned’ clients’ portfolios as the events unfolded or worse still, taken them out of the markets altogether. That will never be the right decision. The advice to clients should always be the same: You invest forever and you never try to time the markets, the economy, or any other event for that matter.

Having exited the markets you would have then been left on the edge of the riverbank without a guide, boat or map, hoping in despair to catch the eye of a passing boat.

The rational, disciplined investor, who was under the caring stewardship of a smart, lifetime adviser, would have continued as normal. Knowing that the markets move, knowing the world moves from panic to crisis and back to panic. However, what they would not have done was ‘reacted’ or ‘positioned’ their portfolios for ‘coming events’. They and their portfolios were already positioned.

This is foresight planning and not impulse reaction planning, which are worlds apart in both intellect and also returns.

Clients’ emotional wants and financial needs are in full-out war and they are simply not equipped to deal with this kind of conflict. Any that don’t have an adviser who offers an ‘invest, sit tight and forget’ strategy, should seek one out.

So we will march forward, post the Brexit vote and post Trump’s election, with our sights firmly set on the prize, i.e. continued innovation, development and wealth creation for decades to come.

As I write this the media are trying to create new sound bites for the next (illusionary) Armageddon towards which, they would have us believe, we are heading. Usually containing the words, recession, cliff, bust, boom, bang-crash-wallop. Remember they’re there to sell pages, clicks and eye balls. Not to serve you, your clients or your clients’ families with investing truths.

Positioning for 2017

So how do we position our investment portfolios heading into 2017?

The history of the stock markets shows that we have absolutely no idea how the markets will perform/react/move. If anyone tells you differently they are lying to you. This is not a mistake on their behalf; it’s an outright lie. And we should be afraid of liars. No one knows what even the short-term market ‘movement’ will be – that is an investment wisdom and truth.

What’s needed for clients is a well-crafted, globally diversified, lifetime investment portfolio, built with foresight in mind – in that it is well spread geographically and also contains thousands of individual securities (stocks, bonds) to weather all market storms and absorb the latest panics and crises which will be thrown at it. Reacting to current noise and ‘positioning’ a portfolio is a fool’s errand.

The pessimist can never be a successful investor; they will continually seek positive confirmation of their negative world views. The optimist will move from crisis to panic and back again, with a confident smile, knowing they are strong and capable enough to deal with anything and everything the world throws at them.

Every year we hear multiple reasons why we should not invest in the stock markets; this will not change. But neither will the fact, as shown historically, that markets do move in a positive direction. As financial planners we can accept this and apply it in helping our clients manage their wealth and financial affairs, or we can be controlled by the journalist who’s job it is to emphasise catastrophe or trivia. The truth is boring and never changes.

I wish you well for 2017 and rest assured, my end of year article in 12 months time will make for very similar reading.

How to invest for success following the US election result

How to invest for success following the US election result

Assuming the presidential election took place yesterday, this is how to position your portfolio.

You will all now know that yesterday (8 November 2016) was a historic day for our planet. The new leader of the free world was announced. So how should you position your portfolio in the light of the fact that President Clinton/Trump is now at the helm?

Winner: Hilary Clinton

After a close battle with Mr Trump we can now confirm Mrs Hilary Clinton won by a close margin and will now be running the most influential country on planet earth. Here’s how I think you should position your portfolio.

Winner: Donald Trump

After a close battle with Mrs Clinton we can now confirm Mr Donald Trump won by a close margin and will now be running the most influential country on planet earth. Here’s how I think you should position your portfolio.

How to position your portfolio under the new President:

What we really want to know is how will the markets react to this Trump/Clinton win?

If you have any understanding of history and markets you will realise that we have absolutely no idea how the markets will perform/react/move.

If anyone tells you differently they are lying to you. I’ll repeat, they are lying to you. This is not a mistake on their behalf; it’s an outright lie. You should be afraid of liars. Certainly when it comes to the long-term financial and life success of you and your family.

The markets my friend may go up, may go down, may stay the same. The short term ‘movement’ is unknowable, always was, always will be. This is wisdom and an investment truth. No one knows where the market will be heading in the short term. If it heads in the direction someone thought or claimed it would, this is an example of hindsight bias, waiting for something to happen and then claiming perfect foresight in hindsight.

A well-crafted globally diversified lifetime investment portfolio (which you should already have) is built with foresight in mind – in that it is well spread geographically and also contains thousands of individual securities (stocks, bonds) to weather all market storms and absorb the latest panics and crisis which will be thrown at it.

Reacting to current noise and, God forbid, ‘positioning’ your portfolio is a fool’s errand.

The talking heads will be shouting down the house and trying to get your attention with what they think you should now do with your portfolio. A sure fire strategy to misbehave yourself to poverty would be to make long-term investment decisions by listening to an ‘expert’ on the big flat screen panel.

Remember they’ve probably never sat in a room with a family, looked into the whites of their eyes and asked them about their hopes, dreams and fears for the future. They’ve never guided a family with care and consideration and told them how to invest their family’s life savings. The only people qualified, from an intelligence and emotional point of view to guide you are caring, compassionate, lifetime financial advisers.

If you don’t have one, seek one out. It’ll be the best investment of your entire life, period. The bulk of the fee (investment) you will pay is for them to be rational during times of irrationality. And thereby keep you rational too. Periods of irrationality are increasing in both frequency and intensity.

The end of the world (your investments) is happening more frequently and expert financial advisers are having to talk their clients off the ledge or away from the loaded gun more frequently then we would like. This is because the echo chamber of modern media and expert opinion has been amplified to an unprecedented level.

If ever there was a time for a professional to have clarity over history and understand the capitalist machine (the stock market) it’s now. If you had Warren Buffet as your financial adviser he’d tell you to put your money into a low cost index fund and never react to the markets. He has said this on many occasions. If the world’s most successful, intelligent investor is consistently telling you this, then common sense says that it pays to listen.

If you haven’t got the gist of this article yet, I’ll make it abundantly clear. Come 9th November 2016, whoever’s name is on the Oval Office door will have zero impact on your 20/30/40 year investment plan.

How to truly invest for success

Expect a lot of noise and panic prediction from the mainstream and financial media in the wake of the Presidential election. It is in their interests to do so and they will do all they can to derail the clarity in your thinking and as a result, your financial plan. It’s their agenda they’re working to – not yours.

But that is the way to destroy your family’s long-term financial success. Acting on impulse is a sure fire way to investment hell; foresight, strategy and belief is the only way success will be possible.

My advice is to block out this noise by seeking out a caring, compassionate financial adviser who will guide you with tough love and sound financial and investment thinking to ensure you behave yourself to wealth and not misbehave your way to poverty.

Please reread this post on the 9th November, as I guarantee you, most ‘experts’ will be lining up to advise you on how to (incorrectly) ‘position’ your portfolio (family’s life savings) when no earthy soul knows how the market will react.

We are entering the Bionic Adviser age, are you ready?

The rate of technological change over the last half century has been mind blowing. In the 1960’s Gordon Moore is famous for observing that computing power was doubling every eighteen to twenty four months. This became known as Moore’s Law. Due to the compounding effect of such a discovery we are now at a point where computing power has become exponential.

Marc Andreessen is a wildly successful venture capitalist. His firm operates on the premise that Software is Eating the World. What will the advances in computing power and exponential technology mean for the average Financial Adviser? How will our profession get eaten?

I’m sorry Mr Financial Adviser please pack your bags the robots are here to replaced you. It was fun whilst it lasted. The latest ‘buzz word’ in personal finance is ‘robo adviser’. It’s important to first clarify exactly what a robo adviser is. Wikipedia describes it as ‘a class of financial adviser that provides portfolio management online with minimal human intervention’. Currently I have not found one firm or organisation that actually provides automated advice. Advice being the key word. I know it’s possible, however I have not yet seen it. What I have seen is automated investment accounts. There are many companies around the world that provide such a service. The question is are they going to disrupt the cosy world of personal financial advice? There is a company who provides ‘investment portfolio advice’ for free, yes for free, the race to the bottom in relation to fees has been won, it’s literally free, with the custodian and ETF’s fee excluding. However the fee for creating and investing within the portfolio is zero.

The portfolios that robo advice firms create are very similar in terms of the portfolio construction. Low charging, globally diversified funds, predominantly ETF’s. What they create can be easily recreated within a packaged, risk graded investment fund. However as we know from history, intelligence or evidence does not sell investment funds. It’s marketing. The robo’s pitch is, we’ll do what your bloated dinosaur financial adviser charges you say 2% , we’ll do it for free or near to. As professional advisers we know this is not the case and the comparison is not fair.

Our value, which I feel strongly about, is working with clients on an on going bases and ensuring they achieve their financial goals. The biggest hurdle in the success of this is the client making big financial mistakes. Our role is to act as a financial behavioural coach. Experts in emotional and human biases. Most importantly spotting when clients are about to make mistakes, which if they are left on their own, they will. We also have empathy and are skilled at thinking as if we were the client.

The current development with exponential technology does not threaten this position we have. The fact that investment management is being demystified and opened up to the women on the street is great news to me.

I consider myself to be a bionic adviser. What is a bionic adviser? A bionic adviser understands that anything which can become binary i.e 0 1 0 1 0 0 will be disrupted by computers and the growth of exponential technology. Which is amazing and offers us fantastic opportunities. The bionic adviser creates an environment where both the computers and also the human excel. There isn’t a fight between them but harmony in each ones unique abilities. We require more firms to understand this and create platforms and solutions that marry the two together. I believe humans should do 10% of the work which adds 90% of the value. The computers should do 90% of the work which only adds 10% of the value.

Computers process information at lightning speed, they beat the human in most of the activities we have to complete as advisers. Those who know me well will know I’m a huge fan of financial forecasting software. Sophisticated financial forecasting software mirrors the environment in which we operate. So understands tax and financial rules. Which incorporate hundreds of variables and seamlessly integrates them. Humans can’t do this. We control the machine however all of the calculations and interactions are effortlessly worked out instantly by the machine. However we are still the experts.

The smart advisers (as is always the case) are welcoming technological advances with open arms. Allowing the robos to help where traditionally we lacked.

Be under no doubt that robos are disrupting this mighty profession, however this is a superb opportunity to outsource more of the boring mundane jobs that robo’s excel at and we human struggle with. I always want to embrace future mind sets and operating practises. Regardless of whether you believe it or not most of what we do can and should be automated. I do not see anything that cannot be automated in a modern financial planning firm. The only work we should be doing once the turnkey systems and processes have been set in motion is working with our clients in a live capacity on their personal financial plan and goals. Ensuring they get back to what’s important and continue to be disciplined investors and achieve their life goals.

Financial advisers have seriously complicated the area of personal financial advice. I know most don’t really understand their key role. It pains me to see IFA’s chasing new investment ideas/concepts/strategies that are being churned out by marketing departments of fund management groups. What are you doing. Completely pointless exertion of energy. You are a financial behavioural coach to your clients. Study after study has told you asset allocation and time in the market are key to investment success, don’t look busy to try and disprove this truth.

In the UK we only really have one robo adviser, I welcome new entrants. As soon as they allow professional money, which they have done in America. I’m sure there will be a large migration of assets onto these platforms. As the platforms in the UK are not fit for purpose at the moment, maybe one is. The humans are still instructing way to many trades, which ultimately leads to errors. I do know there are firms working on bionic propositions. Exciting times for the bionic adviser.

6 strengths of elite advisers that clients may perceive as weaknesses

Regardless of how well we think we’ve trained our clients, they will still make most of their decisions on emotion over logic. We suffer from this when we make decisions in other realms of our lives. However hopefully we show fewer biases with our money management and our skills in achieving financial success.

In this article I will be sharing my thoughts on the strengths that elite advisers demonstrate which some clients may deem as weaknesses. As most mature money management and financial strategies are counter intuitive and against conventional wisdom. Modern media and access to ‘free’ information is maybe our biggest threat and our client’s most destructive influence. If you disagree with my list, write your own, it’s a good way of identifying where our strengths lie.

The sole purpose for my professional existence is to ensure my clients don’t blow themselves up. The world is full of financial landmines and we are our own worst enemies. We all know that clients are the biggest wealth destroyer of all and we don’t manage money (anymore) we manage people. However the client in front of us thinks we’re managing his/her money, when really the majority of my focus is in managing them. So let’s delve into the skills that may be seen as weaknesses.

1: Not reacting to current news.

You don’t need me to tell you that we are now bombarded with ‘news’, which I call Negative Events World Service. 24-hours news and sensationalist journalism are the enemy to financial success; never forget this. The media moves from one crisis to the next. We are never crisis-less. I know there’s a lot happening in the world. However companies will still be making things which people buy. Our clients mistakenly think we should be continually reacting to news and making decisions based on this. We know the truth (which is eternal) about managing money and clients, whereas the media just know news. Clients will mistake our lack of concern, with a lack of competency. Over time, 5 years+ they will start to see our wisdom and appreciate it.

2: Making very little changes with their portfolios.

We all know money is like a bar of soap, the more you touch it the less you have. Timing markets is a fool’s errand and predicting market swings is the preserve of the crazies. Misinformed clients emotionally may feel joy in an adviser continually tweaking their portfolio and what they’re invested in. The elite adviser knows the only sure indicators to long-term success (performance) are discipline and costs. Frequently picking outperformers in advance is impossible. Your lack of ‘action’ maybe perceived as a weakness but actually, it is one of your strengths.

3: Being ecstatic during periods of negative volatility.

If you’re a long-term investor, which means you have monthly automatic savings set up into the markets, you should have a smile from ear to ear during temporary (they are all temporary) market downturns. It could actually be argued this is the whole reason why you’ll be exposed to superior returns. It’s because you were disciplined during periods of low asset prices. The only item clients actively pay over the odds for are investment assets. They love sales in every other area of their lives yet they hate investment sales. The stock market offers, January sales, Easter sales, Black Friday, the lot. A tiny minority understand the impact of these. How many times has one of your clients said, ‘I’m loving the temporary market declines, I’m getting a lot more bang for my buck’.

4: Spending as little time as possible discussing investment performance.

We know lifetime financial success will be determined by behaviour and not making big financial mistakes — there are too many of those to list in this article. I aim to talk about investments for approximately 5% of my client planning meetings. As this is how much impact a ‘portfolio’ has on lifetime financial success. How much you save is far more important. What you want to achieve and when has more impact. Why would you want to spend any longer discussing the past and also something that is fundamentally out of our control? Some client’s will think that ‘investment performance’ is the main driver, so if you spend little time on this they may think this is a weakness. We are here to deliver uncomfortable truths and not comfortable lies. Performance chasing is like a patient going to see a doctor for more drugs. The doctor knows that the patient’s lifestyle is likely to have a far more profound effect on their health than the drugs that are prescribed. Rather than prescribe yet more drugs, the answer is exercise more, eat better, quit excess drinking and stop smoking, these are the route cause of the issues.

5: Always focusing on the future and spending little time worrying about now and the past.

We forget how skilled we are at thinking about the future (most people can’t process their future self). As I say to most of my clients, the 62-year-old sat in front of me is not my client. It’s the 92-year-old you’ll become in 30 years. I’m also not really bothered where they currently are, when we first meet. This is a snap shot of time; future planning is what I’m concerned about. They may perceive our lack of interest in their current position as concerning, when really it’s a mature skill.

6: Not having and immediate answer when asked a question.

Clients ask many questions, which is great as it shows they’re engaged. Some we can answer there and then, hopefully without boring them too much with the mess that is financial services. However some questions are too tough to answer on the fly, as they’re hyper complex. This can be expanded to all areas of life, you should be wary of someone who can answer any question without missing a beat. They’re either a genius or a fool, usually the latter. Intelligent people can often be heard saying ‘I don’t know, I’ll need to look into that’, I like to hear this as it shows humility. Those who least need help, seek it. Humble people often seek help, which is encouraging. Some clients however may think this exhibits a lack of knowledge, when in actual fact it’s to the contrary.

Financial Advice is a noble profession; it’s hyper complex, full of emotion and continually evolving. We have to manage our client’s behaviour and emotions.

If you do what your client tells you to do you are perpetuating bad behaviour and you have lost, no question. You need to stop giving your clients what they want and be ruthless in giving them what they need.

This may result in uncomfortable discussions, maybe even clients leaving you. However being professionally authentic is crucially important in reaching the top of this mighty profession. I still have a lot to learn and I certainly don’t have all the answers, however I am ruthlessly aware of the biases which accelerate bad behaviour, we all need to train our bias bells and be ready to address them once they go off.

If Warren Buffett was your Financial Adviser

Warren Buffett is a genius, he’s also (wildly) rich. He’s one of my life heroes. Having extensively read his material for close to a decade I can honestly say I passionately agree with everything he says and writes. Literally everything.

Warren Buffett and his partner in business, Charlie Munger, have approximately 150+ years of life and investment experience between them. It’s no coincidence that they are considered fountains of knowledge and very wise (old) men. It’s said that Warren Buffett is the guy that everyone quotes but whose advice few follow. That is the premise of this article.

Warren Buffett lives a very frugal life. He’s lived in the same house for 58 years, valued at around $400k. He only has one house (his fellow billionaires collect them). He doesn’t eat in fancy restaurants. He does wear expensive suits, however he says they look cheap on him. He does fly in a private jet (well, he is a billionaire). His rich friends have armies of staff and multiple homes across the globe. However he says, the things people own, end up owning them.

Warren Buffett and Charlie Munger run the investment/business powerhouse that is Berkshire Hathaway and for years they’ve been publishing their quarterly and annual statements online for all to consume. This is a treasury trove of priceless material. I’ll emphasis that again, it’s priceless.

Every year they run the Berkshire Hathaway annual meeting, in Omaha, dubbed the Woodstock of capitalism. This year (as always) he was extremely vocal about how the average person should invest in order to be financially successful. It was also the first year it was streamed live across the world. Yahoo Finance got the gig. Here’s the linkhttps://finance.yahoo.com/brklivestream/ If you’re pushed for time watch the key section which runs from 2hours 42 minutes. Buffett calls it a sermon.

In 2008 Warren Buffett waged a bet with the hedge fund Protégé Partners. The premise was that Warren Buffett would back the S&P 500 Index fund and Protégé Partners would pick a basket of hedge funds. The winner would be the highest performer after 10 years of investment returns after charges (this is important). The bet was for a million bucks, not chump change for us but for Warren Buffett this is an hour’s overtime. None-the-less he doesn’t like losing money; it’s actually his first AND second rules when it comes to business.

We’re now eight years into this bet and, just for the ones keeping score, the S&P 500 is currently up 61.8% and the hedge funds are only up by 21%. This is the most public bet ever conducted between two smart market participants — one taking the side of the passive approach (just buying the market) and the other paying smart people to continually outsmart the market (the active hedge funds).

We’re in unprecedented times, we have never had the current number of affluent global citizens living so long in retirement. Unprecedented. That the baby boomers not outlive their capital is of paramount importance and a major social challenge.

Individuals now control more capital than ever before and are required to strategically invest this money over decades and ensure it’s purchasing power (if inflation doesn’t hammer it) over a 30/40+ year time horizon. I lose professional sleep over this matter.

There are only a few people intellectually looking for solutions to this (many are highlighting problems — mainly market participants that have never seen a client). Most have a vested interest in some product/survey/plan/idea and actually exacerbate the problem. Wealthy retires are not equipped to intellectually tackle this major problem. The financial media (a.k.a financial pornography) continually confuse investors and distract them from the unvarnished truth. They are hell bent on news and have never been purveyors of financial truths.


So what might Warren Buffett do if he was your financial adviser? (This is obviously just my take based on his previous commentary and studying his wise words and his financial truths.)

Warren Buffett is countercultural and valiantly fights against conventional wisdom (the incorrect current practices). So what might Warren say if he was advising private clients on how to achieve and maintain financial and life success. Of fundamental importance is not out living your money and leaving a meaningful legacy.

His faith in global capitalism is unrelenting, he believes that over time companies will innovate and return profits to the shareholders that own these companies. He’s told his widow that when he pops it she should place 90% of her assets in an index fund which tracks the top 500 companies in America. He did mention Vanguard would be a good choice. He then said place the rest of your assets in cash, for everyday spending and to ride the volatile temporary declines in stock prices.

You notice he hasn’t mentioned property, commodities, options, managed futures or any other hot fad or ‘alternative’ asset class (investment noise). He’s kept it incredibly simple. He hasn’t overcomplicated for profit.

He’s also a huge fan of not watching market prices or, as he says, Mr Market. Basically invest and forget. This reflects the old adage that money is like a bar of soap the more you touch it (look at it) the less you’ll have.

He’s also famous for saying be greedy when others are fearful and fearful when others are greedy. Basically, if you are investing money as opposed to spending it, you should be ecstatic when the markets are temporarily down (as all downturns are temporary). This is investing 101, understanding that temporary downturns in the market are just that. I have a smile ear to ear when the markets offer me temporary sales.


If Warren Buffett was in front of financial advice clients I think he might sum up his advice like this:

Mr Investor, the world is trying to get your attention and divert you away from the unvarnished truth about financial success. Skyscrapers are built on investment lies.

You need to put money aside for any known expenses that you have coming up in the next three or so years and also have a cash buffer of approximately 10% of your investable assets. The rest put to work in a super cheap index fund that tracks a collection of great global companies.

Ideally never look at the value day-to-day or even month-to-month. Even yearly is a pointless arbitrary date. We know that over the coming decades the reason for your superior returns from owning great companies is that you are disciplined through the temporary downturns. If you can’t agree with this truth, you’ll never be a successful investor.

I don’t need you to complete a risk survey, which was never designed to make you a better investor or even help you understand the behavioural challenge you face. I also don’t need to over analysis your portfolio. The truth is your investments will underperform to the extent they are lacking great companies (which we call equities).

I guarantee that if you follow this buy and hold strategy you’ll not outlive your capital, you’ll maintain a high level of purchasing power (your money keeping up with the prices of the day) and you’ll perform better than all of your neighbours. Also a healthy legacy can be passed down to your loved ones.

I will help you create a multi-year financial forecast to help plan the key events in your life and your spending patterns. I will charge you for this work but I have to be brutally honest, I won’t be doing much ‘work’ once your plan is set up and follows the truth about investing success.

My main role will be ensuring you stick to this plan and stay on track (this is far harder than it sounds), because the media and other purveyors of untruths will be trying to flag you down at every opportunity they get. Some clients have asked me why they are paying me on an ongoing basis to do ‘nothing’? My answer is always you wouldn’t have come to this conclusion without me, therefore my fee is priceless and provides exponential value.

My final point is that study after study has proven that bad investor behaviour (misbehaving) is the most destructive wealth destroyer of all. It is calculated that an individual investor (due to continually misbehaving) will underperform his investment potential by circa 50%. Which means left to your own devices you’ll receive half the returns (or wealth) you are entitled to due to making the wrong decisions at the wrong time for the wrong reasons. Weirdly the very lazy investor trumps (by a considerable factor) the hyperactive action-seeking investor.

Finally, I can only continue to work with you if my advice is uncontested. There is a professional fantasy that all clients should understand the advice their adviser shares with them. Personally I know you’ll never fully understand me; all I ask is that I am believed. Also expect that I will continue to deliver uncomfortable truths and not the comfortable lies to which many of you may have become accustomed.